Whew! How NYers may avoid a $1.5B income-tax hit

New York state Budget Director Robert Mujica on Thursday, Feb. 8, 2018, talked to reporters about the state's plan to decouple state taxes from the new federal tax plan, a move that would save New Yorkers about $1.5 billion.
Joseph Spector, Albany Bureau

New York officials on Thursday said they will decouple state taxes from federal taxes to avoid a $1.5 billion tax increase on residents and businesses.(Photo: Jon Campbell / Gannett)

A tax department report last month found that some New Yorkers would face significant tax increases because the federal tax policy will limit state and local tax deductions to $10,000 a year.

"New York State could consider decoupling from the new federal law, effectively restoring current deductibility at the state level," the tax department report said.

Mujica said the change is important to make sure New Yorkers aren't hit with an unintended tax increase.

"This action will lower the tax base to which state rates are applied, shielding New Yorkers from these federal changes," Mujica said.

"This issue was created in Washington, but we can fix it in New York."

Senate Finance Committee chairwoman Cathy Young, R-Olean, Cattaraugus County, said she was pleased the change would be made. The Senate passed a bill last month to decouple state tax law from the federal tax measure.

The governor each year can make amendments to his budget plan 30 days after it is introduced. The measures are then part of budget negotiations between the governor the legislative leaders for the fiscal year that starts April 1.

"I’m very glad to hear that in the governor’s 30-day amendments there will be a provision regarding legislation that has already passed in the Senate," Young said at the hearing.

Mujica said the changes in Cuomo's budget would "substantially similar" to the Senate bill.

"We’re going through all of those provisions, but the vast majority of that bill is consistent with what we plan to produce in the executive budget in the 30-day amendments," he said.

The Cuomo administration is also considering an overhaul of New York's tax code to address the limit on state and local tax deductions.

Mujica said the state hopes to have its recommendations in the 30-day amendments.

Among the considerations are moving away from a income-tax system to a payroll-tax system as a way to shield New Yorkers' income from the federal tax plan.

"We cannot do nothing. To do nothing is to sit idle while New Yorkers are taken advantage of and their taxes go up and property values go down," he said.

Business groups have urged the state to avoid any tax increases in the budget, as well as decouple the state taxes from the federal changes.

They are also concerned about switching from an income-tax system to a broader payroll tax, fearing the impact it could have on employers.

"Governor Cuomo and legislative leaders must recognize that New York has a spending problem – not a revenue problem," Greg Biryla, executive director of Unshackle Upstate, a Rochester-based business group, said in a statement.

"Any proposal to enact new taxes or expanding existing ones must be rejected outright. Hardworking taxpayers are sick and tired of being treated like Albany’s own ATM."